Investing.com-- Most Asian currencies moved little on Friday, while the dollar steadied ahead of more cues on U.S. interest rates and the economy from key nonfarm payrolls data due later in the day.
Sentiment towards regional markets remained strained after the onset of renewed trade tensions between the U.S. and China earlier this week. Markets were watching for any dialogue between U.S. President Donald Trump and his Chinese counterpart Xi Jinping.
The Chinese yuan remained weak, with the USD/CNY pair hovering close to 7.3 yuan. The currency had weakened sharply as onshore markets reopened from the Lunar New Year holiday this week.
A rally in the Japanese yen- on growing signs that the Bank of Japan will hike interest rates further- now appeared to have wound down, although the USD/JPY pair remained on track for its best week since November.
Dollar steady as nonfarm payrolls data looms
The dollar index and dollar index futures steadied in Asian trade, although they were nursing some losses for the week amid mixed signals from Trump on trade tariffs.
Focus was squarely on nonfarm payrolls data for January, due later in the day, for more cues on the labor market.
Traders were seen bracing for a potentially strong payrolls reading, amid continued signs of resilience in the U.S. labor market. Still, January’s data may reflect some disruptions caused by the California wildfires at the beginning of the year.
Strength in the labor market gives the Federal Reserve more headroom to keep interest rates unchanged for longer- a scenario that presents pressure for Asian markets.
The central bank recently signaled that it had no intention of cutting interest rates in the near-term, amid concerns over sticky inflation and uncertainty over Trump’s policies.
Japanese yen clocks strong week on BOJ rate hike bets
The yen was a standout performer in Asia this week, with the USD/JPY pair set to fall about 2.3%- its biggest weekly drop since November.
The Japanese currency was buoyed chiefly by increased bets that the BOJ will have enough impetus to raise interest rates even further in the coming months. Strong wage and household spending data factored into these expectations, as did hawkish comments from some BOJ board members.
The BOJ is expected to raise rates by at least 50 basis points, bringing them to 1% by end-2025.
Broader Asian currencies were largely muted. The Australian dollar’s AUD/USD pair drifted higher as it extended a recovery from a near five-year low hit in January.
The Indian rupee’s USD/INR pair hovered near record highs, as the rupee was battered by anticipation of a potential interest rate cut by the Reserve Bank of India later in the day.
The Singapore dollar’s USD/SGD pair rose 0.1%, while the South Korean won’s USD/KRW pair rose 0.1%.